Maharashtra and Rajasthan are among India’s large states in terms of population. The former is also among the most prosperous, with its economic growth driven by the services sector, primarily financial and IT services. The state accounted for over one-third of all direct tax collections in the country and around 15% of the GST mop-up last fiscal year.
Rajasthan is an average state in terms of its per-person income, going by average real state net domestic product (NSDP); its real NSDP is about 63% of Maharashtra’s. While the state has raised its economic growth, its performance has not been consistent. Since Maharashtra’s average income level is higher, one might assume its average consumption levels would also be higher than Rajasthan’s.
However, as per recently released data on household consumption expenditure for 2022-23, nominal as well as real spending (adjusted for inflation) per person in rural Rajasthan was higher than in rural Maharashtra. In fact, it was well above India’s rural average. Similarly, Gujarat, another leading state based on per-person income, does worse than Rajasthan in terms of average rural consumer spending.
Even in urban areas, per-person spending in Maharashtra was not all that much higher than in Rajasthan. It was just around the national urban average. What explains such a contrast between per-person income (with per person real output as proxy) and real consumption spending (adjusted for inflation)? If the above comparison included the value of state welfare transfers, differences in such provisions would explain gaps.
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